Facts About the Taxation of Disability Benefits

Facts About the Taxation of Disability Benefits

If you have ever wondered if your Social Security disability benefits will be taxed, you are not alone. This question is a common, and for good reason. There is not a clear-cut yes-or-no answer to this question. There are many circumstances and factors that are considered in the answer to it, and the answer is not the same for everyone.

Word cloud with taxes and taxation themed words


Sources of income
People who receive disability benefits as their only source of income are not required to pay federal income tax on it. However, anyone who receives disability, as well as another type of income, may be required to pay taxes. If the total income you make exceeds $25,000 annually for a single person or $32,000 for a jointly-filing married couple, you will have to pay federal income taxes on the total income. The following sources of income should be added to determine if you meet the minimum taxable amount:

– Half of your disability benefit amount
– All of your taxable pension payments
– Any wages you earn
– All interest on savings accounts
– All dividends on stocks, bonds, mutual funds and other investments
– Any rental income or other types of passive income
– All other normally taxable income


Filing status
A married individual who is filing income tax separately from his or her spouse, the benefit amount is taxable, regardless of income level. A married individual who is filing jointly with his or her spouse can have a combined income up to $32,000 before the benefit amount is taxed. If the income surpasses that amount, 85% of the disability benefit is taxed by the federal government.

Lump-sum payments
If a lump-sum payment is awarded retroactively due to previous payments that were owed but not paid, the entire amount of the lump payment will be taxed at the same time.


State requirements
Each state has different laws regarding the taxation of disability payments. Anyone receiving disability benefits should check with the state in which he or she resides to find out which rules they must follow. The state of Ohio requires its residents to pay income taxes. However, those who are receiving disability benefits are exempt from being taxed for it.

Tax laws are complicated and vary from state to state. If you receive Social Security disability in Cleveland Ohio, contact a qualified and reputable attorney who can answer your questions regarding the taxation of your benefits.

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